diff --git a/app/models/scheme.rb b/app/models/scheme.rb
index 67b577ed2..a4dd21418 100644
--- a/app/models/scheme.rb
+++ b/app/models/scheme.rb
@@ -22,6 +22,7 @@ class Scheme < ApplicationRecord
   scope :order_by_service_name, -> { order(service_name: :asc) }
 
   validate :validate_confirmed
+  validate :validate_owning_organisation
 
   auto_strip_attributes :service_name
 
@@ -212,6 +213,12 @@ class Scheme < ApplicationRecord
     end
   end
 
+  def validate_owning_organisation
+    unless owning_organisation.holds_own_stock?
+      errors.add(:owning_organisation_id, :does_not_own_stock, message: I18n.t("validations.scheme.owning_organisation.does_not_own_stock"))
+    end
+  end
+
   def available_from
     FormHandler.instance.collection_start_date(created_at)
   end
diff --git a/config/locales/en.yml b/config/locales/en.yml
index 2463041f9..6c2d7db46 100644
--- a/config/locales/en.yml
+++ b/config/locales/en.yml
@@ -341,6 +341,8 @@ en:
         before_deactivation: "This scheme was deactivated on %{date}. The reactivation date must be on or after deactivation date"
       deactivation:
         during_deactivated_period: "The scheme is already deactivated during this date, please enter a different date"
+      owning_organisation:
+        does_not_own_stock: "Enter an organisation that owns housing stock"
 
 
 
diff --git a/db/seeds.rb b/db/seeds.rb
index 5ac6bbad4..20975feb8 100644
--- a/db/seeds.rb
+++ b/db/seeds.rb
@@ -186,7 +186,7 @@ unless Rails.env.test?
       address_line1: "Higher Kingston",
       address_line2: "Yeovil",
       postcode: "BA21 4AT",
-      holds_own_stock: false,
+      holds_own_stock: true,
       other_stock_owners: "None",
       managing_agents_label: "None",
       provider_type: "LA",
diff --git a/spec/models/scheme_spec.rb b/spec/models/scheme_spec.rb
index 2f65ba442..f59fe56c5 100644
--- a/spec/models/scheme_spec.rb
+++ b/spec/models/scheme_spec.rb
@@ -209,4 +209,16 @@ RSpec.describe Scheme, type: :model do
       end
     end
   end
+
+  describe "owning organisation" do
+    let(:stock_owning_org) { FactoryBot.create(:organisation, holds_own_stock: true) }
+    let(:non_stock_owning_org) { FactoryBot.create(:organisation, holds_own_stock: false) }
+    let(:scheme) { FactoryBot.create(:scheme, owning_organisation_id: stock_owning_org.id) }
+
+    context "when the owning organisation is set as a non-stock-owning organisation" do
+      it "throws the correct validation error" do
+        expect { scheme.update!({ owning_organisation: non_stock_owning_org }) }.to raise_error(ActiveRecord::RecordInvalid, /Enter an organisation that owns housing stock/)
+      end
+    end
+  end
 end
diff --git a/spec/requests/schemes_controller_spec.rb b/spec/requests/schemes_controller_spec.rb
index 9ea9de205..5530600ff 100644
--- a/spec/requests/schemes_controller_spec.rb
+++ b/spec/requests/schemes_controller_spec.rb
@@ -471,7 +471,7 @@ RSpec.describe SchemesController, type: :request do
         end
       end
 
-      context "when missing required scheme params" do
+      context "when required params are missing" do
         let(:params) do
           { scheme: { service_name: "",
                       scheme_type: "",
@@ -489,6 +489,16 @@ RSpec.describe SchemesController, type: :request do
           expect(page).to have_content(I18n.t("activerecord.errors.models.scheme.attributes.service_name.invalid"))
         end
       end
+
+      context "when the organisation id param is included" do
+        let(:organisation) { FactoryBot.create(:organisation) }
+        let(:params) { { scheme: { owning_organisation: organisation } } }
+
+        it "sets the owning organisation correctly" do
+          post "/schemes", params: params
+          expect(Scheme.last.owning_organisation_id).to eq(user.organisation_id)
+        end
+      end
     end
 
     context "when signed in as a support user" do
@@ -566,7 +576,7 @@ RSpec.describe SchemesController, type: :request do
         end
       end
 
-      context "when missing required scheme params" do
+      context "when required params are missing" do
         let(:params) do
           { scheme: { service_name: "",
                       scheme_type: "",
@@ -586,13 +596,14 @@ RSpec.describe SchemesController, type: :request do
         end
       end
 
-      context "when required organisation id param is missing" do
-        let(:params) { { "scheme" => { "service_name" => "qweqwer", "sensitive" => "Yes", "owning_organisation_id" => "", "scheme_type" => "Foyer", "registered_under_care_act" => "Yes – part registered as a care home" } } }
+      context "when organisation id param refers to a non-stock-owning organisation" do
+        let(:organisation_which_does_not_own_stock) { FactoryBot.create(:organisation, holds_own_stock: false) }
+        let(:params) { { scheme: { owning_organisation_id: organisation_which_does_not_own_stock.id } } }
 
         it "displays the new page with an error message" do
           post "/schemes", params: params
           expect(response).to have_http_status(:unprocessable_entity)
-          expect(page).to have_content(I18n.t("activerecord.errors.models.scheme.attributes.owning_organisation_id.invalid"))
+          expect(page).to have_content("Enter an organisation that owns housing stock")
         end
       end
     end
@@ -638,12 +649,11 @@ RSpec.describe SchemesController, type: :request do
         end
       end
 
-      context "when params are missing" do
+      context "when required params are missing" do
         let(:params) do
           { scheme: {
             service_name: "",
             managing_organisation_id: "",
-            owning_organisation_id: "",
             primary_client_group: "",
             secondary_client_group: "",
             scheme_type: "",
@@ -656,7 +666,7 @@ RSpec.describe SchemesController, type: :request do
           } }
         end
 
-        it "renders primary client group after successful update" do
+        it "renders the same page with error message" do
           expect(response).to have_http_status(:unprocessable_entity)
           expect(page).to have_content("Create a new supported housing scheme")
           expect(page).to have_content(I18n.t("activerecord.errors.models.scheme.attributes.service_name.invalid"))
@@ -923,7 +933,7 @@ RSpec.describe SchemesController, type: :request do
       end
     end
 
-    context "when signed in as a support" do
+    context "when signed in as a support user" do
       let(:user) { FactoryBot.create(:user, :support) }
       let(:scheme_to_update) { FactoryBot.create(:scheme, owning_organisation: user.organisation, confirmed: nil) }
 
@@ -934,7 +944,7 @@ RSpec.describe SchemesController, type: :request do
         patch "/schemes/#{scheme_to_update.id}", params:
       end
 
-      context "when params are missing" do
+      context "when required params are missing" do
         let(:params) do
           { scheme: {
             service_name: "",
@@ -952,7 +962,7 @@ RSpec.describe SchemesController, type: :request do
           } }
         end
 
-        it "renders primary client group after successful update" do
+        it "renders the same page with error message" do
           expect(response).to have_http_status(:unprocessable_entity)
           expect(page).to have_content("Create a new supported housing scheme")
           expect(page).to have_content(I18n.t("activerecord.errors.models.scheme.attributes.owning_organisation_id.invalid"))